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WIKI ANALYSIS
ev3 Inc. (NASDAQ: EVVV) manufactures and markets medical devices for treating peripheral vascular and neurovascular diseases. Vascular disease refers to diseases pertaining to blood vessels outside of the heart and the brain.[1] In 2009, ev3's net sales were $422.5 million.
ev3 has become the the second largest producer of neurovascular products in terms of total revenue.[2] The company develops and manufactures the broadest product portfolio with over 100 [3] products. ev3 markets its products worldwide, with a majority of its customer base coming from the healthcare space.[4]
Company Overview
ev3's customers include a broad cross-section of physicians, including interventional radiologists, neuroradiologists, vascular surgeons, neuro surgeons, other endovascular specialists and interventional cardiologists. The company sells its products in more than 65 countries through a direct sales force in the United States, Canada, Europe, Australia and other countries and distributors in selected other international markets.[5]
As of December 31, 2009, ev3 had 114 direct sales representatives selling its peripheral vascular products and 25 direct sales representatives selling its neurovascular products in the United States.[5] ev3 has a manufacturing facility located in Plymouth, Minnesota, at which it manufactures most of its peripheral vascular products, and a manufacturing facility located in Irvine, California, at which it manufactures most of its neurovascular products and a few of its peripheral vascular products. [5]
Business and Financial Metrics
First Quarter 2010 Results[6]
ev3 reported first quarter net sales of $123.9 Million, an increase of 23% from the prior-year period. Excluding $2.9 million of positive impact due to foreign currency exchange rates, net sales increased 21% versus the prior year quarter. First quarter GAAP EPS increased to $0.09, and cash and cash equivalents increased to $116.8 Million.
ev3's GAAP net income for the first quarter of 2010 was $9.9 million, or $0.09 per diluted share, compared to a net loss of $(1.8) million, or $(0.02) per diluted share, in the first quarter of 2009. Non-GAAP adjusted net income in the first quarter of 2010 was $22.3 million, or $0.20 per diluted share, compared to adjusted net income of $7.1 million, or $0.07 per diluted share, in the first quarter of 2009.
The company achieved another quarter of significant sales growth in both the neurovascular and peripheral vascular segments that outpaced market growth rates in U.S. and international markets. ev3's neurovascular segment, which grew 44% in the first quarter compared to the prior year quarter, reflects the broad penetration the company is making across its entire product line and the positive response to the international launch of its Pipeline Embolization Device and Solitaire FR Revascularization Device for ischemic stroke.
Business Segments
ev3 is has two business segments: peripheral vascular and neurovascular.
Peripheral vascular segment
This segment includes products that are used primarily in peripheral vascular procedures by interventional radiologists, vascular surgeons and interventional cardiologists and in targeted cardiovascular procedures. [5]
Neurovascular segment
This segment includes products that are used primarily by neuroradiologists, interventional neurologists and neurosurgeons.[5]
Acquisitions
In June of 2009, ev3 acquired Chestnut Medical Technologies, Inc., a privately-held California-based company focused on developing minimally invasive therapies for interventional neuroradiology.[5] ev3 acquired 100 percent of the equity interests of Chestnut for total consideration valued at $116.7 million, consisting of upfront consideration of common stock and cash valued at $79.4 million, as well as an additional milestone-based contingent payment of up to $75.0 million, payable in a combination of common stock and equity, upon FDA pre-market approval of the Pipeline Embolization Device. [5] The transaction broadens ev3's neurovascular product portfolio by adding the Pipeline Embolization Device for the treatment of cerebral aneurysms and the Alligator Retrieval Device for foreign body retrieval to its existing neurovascular embolic products and neuro access technologies.[5]
Trends and Forces
Regulatory Hurdles
The Food and Drug Administration (FDA) serves as an entity that establishes or modifies foods, drugs, biologics, cosmetics, radiation-emitting electronic products, and medical devices for approval for use by the general public. ev3's products may or may not be approved by the FDA ,and this will have a considerable impact on net income and revenues in the future. ev3's products consist of Class I-III devices which all have different regulations.
ev3 is currently conducting a clinical trial called the DEFINITIVE trial, a post-market study evaluating the benefits of their Silverhawk product. ev3 has also enrolled its first patients in the DEFINITIVE Ca++ US IDE study which evaluates the Rockhawk device and the SpiderFX Embolic Protection Device for the treatment of calcified peripheral artery lesions. The main reason for these trials is to encourage physician use of atherectomy as a front line treatment for patients with these diseases. [7]
Recall on FDA approved device
On December 1st 2009, ev3's Protege Everflex Self-Expanding Biliary Stent System was recalled by the FDA because of ev3 determined that a lot of 150mm Protege EverFlex Biliary Stent System contains a 100mm length Self-Expanding stent. All of the Class II stents need to be recalled because the implantation of a stent 50mm shorter than expected may not cover the full length of the target lesion and may require subsequent intervention [8]
Leadership in the Endovascular Market
There are an estimated 35,000 thoracic aortic surgical and endovascular interventions performed every year in the developed world. The market in which ev3 operates is said to reach $250 Million Globally by 2012 based on these progressive numbers.[9] Based on technological advances in therapies around the world, ev3 is positioned to address the increasing demand for therapy through their innovative product given FDA approval of novel technologies.
Diverse Portfolio
ev3 has one of the most complete portfolios in the peripheral vascular business. Although the FoxHollow acquisition has been disappointing, the other segments within the peripheral segment have grown above the market rate in the past 3 quarters. ev3 is also moving toward profitability on a GAAP basis and this will be attractive to driving more solid earnings growth. [10]
Competitive Strengths: Vascular Focus and New Management
New Management
ev3 changed its CEO to Bob Palmisano who joined the company in April 2008 from the ophthalmology industry. The CEO has led the company through two mergers, the Summit Autonomous to Alcon Labs in 2000 and Intralase to Advanced Medical Optics in 2007.This experience aids in the transition as the company integrates the Fox Hollow acquisition. ev3 also has a new CFO, Shawn McCormick who joined in January. He worked for Medtronic (one of ev3's competitors) where he headed up the company’s corporate development efforts. Acquiring new management from the competitor leads to new leadership direction and experience from a proven medical company such as Medtronic.
Focus
ev3 is one of the only medical device companies in the United States focused on the endovascular device market with a global presence in the peripheral vascular and neurovascular sub-markets.[11] Some of the noted competitive strengths come from targeting under-innovated and emerging markets, leveraging products across major endovascular sub-markets, investing in clinical research, expanding business through product innovation and strategic acquisitions and a seasoned management team. If ev3 is able to harness these strengths and move into different markets as the global need for endovascular products gains traction, they will be able to tap the market's full potential and be prepared to market its products.
Competition
ev3's competitors include companies such as Boston Scientific Corporation (NYSE: BSX), Medtronic Inc. (NYSE: MDT - News), C.R. Bard (NYSE: BCR), Cordis, and others in the endovascular market. [12]
ev3's peripheral vascular devices are mostly catheter-based. These are deployed to treat diseased vessels outside of the heart that have been become blocked or calcified. [13]
The company has the number 2 position in the neurovascular market and roughly 20% share of the $670 million globally. [14]
Medtronic is a competitor in the vascular market with 10% market share. Cordis (Part of the Johnson & Johnson family of companies) had total sales of $3.1 billion in 2008, but most of this revenue came from the stent portion of the business. Boston Scientific main products are coronary drug-eluting stents, cardiac rhythm management devices, pacemakers and implantable cardioverter-defibrillators.
ev3 has the least amount of revenue, profit margin, gross profit, and employees among the main competitors.
| Competitive Metrics | Medtronic | Boston Scientific | C.R. Bard | ev3 |
| Revenues | $15.09B | 8.11B | 2.49B | $422 M |
| Profit Margin | 15% | -29% | 20% | -61% |
| Gross Profit | $11.08B | $5.58B | $1.50B | $279M |
| Net Income | $2.21B | $-2.34B | $503M | $-262M |
| Employees | 41,158 | 24,800 | 11,000 | 1,250 |
References
- ↑ neurovascular
- ↑ Annual Report 2008, The World's Broadest Endovascular Product Offerings, Page 01
- ↑ endovascular Wikipedia: Endovascular surgery
- ↑ Yahoo Finance ev3 Profile
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 ev3 Annual Report 2009
- ↑ ev3 Investor Relations: "ev3 Reports 2010 First Quarter Financial Results" April 29, 2010
- ↑ Thomas Weisel Partners, ev3, Page 10
- ↑ ev3 December 01, 2009 Recall
- ↑ Business Wire: Endovascular Market Forecast to Reach US$250 Million Globally by 2012
- ↑ [Thomas Weisel Partners, ev3, Page 5]
- ↑ Corporate Profile ev3
- ↑ ev3 Beats Zacks Estimate
- ↑ [Thomas Weisel Partners, ev3, Page 2]
- ↑ [Thomas Weisel Partners, ev3, Page 3]
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